An Empirical Investigation of the Effectiveness of Fraud Risk Assessment in Audit Engagements

Posted: Sep 06, 2022

• Austin Rhodes
• Evie Martinez
• Hayden Ellis

Abstract

This research presents a comprehensive empirical investigation into the effectiveness of fraud risk assessment methodologies within contemporary audit engagements, employing a novel multi-methodological approach that combines quantitative analysis of audit outcomes with qualitative assessment of auditor decision-making processes. The study examines 347 audit engagements across multiple industries over a three-year period, utilizing a proprietary framework that integrates traditional risk assessment protocols with behavioral analytics and machine learning algorithms to evaluate the predictive accuracy of fraud risk identification. Our findings reveal significant discrepancies between perceived and actual effectiveness of current fraud risk assessment practices, with traditional methods demonstrating only 42